Here's your end of financial year wrap up

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May 29, 2019 | Posted in Superannuation, Tax
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The topics covered in this blog are a snapshot of some of the things to consider as we head towards the end of the 2019 financial year. We will cover the areas of Taxation, Superannuation and Insurance. 

Taxation

Now that the 2019 Federal Election has been resolved, we can now turn our attention to 'business as usual'.

While still very early days, we expect the Coalition to simply pursue their tax cut agenda, to reduce personal and corporate taxes in order to encourage economic activity and investment in the Australian economy from both domestic and overseas investors alike. The key point emphasised by the government in the last 48 hours, in regards to the tax system, is that the electorate is not interested in wholesale tax reform at this point in time.

With the end of the 2019 approaching, we would like to draw your attention to some things worth considering as part of your year-end tax planning.

As always, we are here to assist you. If you have questions about any of the strategies mentioned in this email, or you would like to explore new opportunities for tax planning that might be appropriate for your situation, please don’t hesitate to contact your dedicated Ulton accountant.

Things to consider: 

  1. Pre-pay deductible expenses – if you have expenses that are tax deductible, consider paying them before 30 June in order to bring forward your tax deduction to the current financial year. Also, if you run an eligible small business, the instant asset tax write-off that was available in past financial years has been extended to 30 June 2019.
  2. Small business entities - can immediately deduct depreciable assets costing less than $30,000.
  3. Residential rental properties – travel expenses – for individual investors that have residential rental properties, the tax deduction for travel expenses to inspect the property was abolished from 1 July 2017.  
  4. Residential rental properties – new assets – remember to only depreciate assets you purchased and installed since purchase (assets that were acquired from the previous owner are no longer depreciable).
  5. Residential rental properties – depreciation and capital works schedule – consider engaging a quantity surveyor to ensure you are claiming all possible deductions.  
  6. Consider family trust distribution decisions -  be sure to discuss with your accountant before 30 June 2019.
  7. New business deduction rules and PAYG withholding – from 1st July 2019 any payment made by a business that is required to have a PAYG amount withheld deducted from it, will only be deductible to the business if PAYG is in fact withheld – for example, wages, no-ABN or contractor payments who are more correctly employees. This applies to the whole amount that is subject to the PAYG rules.
  8. Defer income – where possible consider deferring income until after the end of the financial year, or where your tax rate is likely to be higher in the 2020 financial year, consider bringing income forward to the 2019 financial year.
  9. Planning to retire, or stop working? – if so, consider deferring your plans to stop working until early in the next financial year. Any lump sums you receive from your employer such as payments for accrued annual and long service leave, will be taxed in the year they are received. If your tax rate is likely to drop in the 2020 financial year, deferring leaving work, may result in a lower rate of tax being payable.
  10. Tax deductible superannuation contributions – from 1 July 2017, claiming a tax deduction for personal superannuation contributions got easier. Tax deductions are now available to a much wider group of taxpayers. However, contributions are subject to limits and can generally only be made by people under the age of 65, unless they continue to work. Speak to us about this opportunity.
  11. Maintain good records – there is nothing more frustrating than not being able to find receipts and payment records when tax time arrives. Consider using an app or other web-based solution for recording expenses and maintaining your vehicle log book.
  12. Net medical expenses offset – this financial year is the last year the offset will be available for costs associated with disability aids, attendant care, and aged care fees.
  13. Private health insurance – having your own private health insurance may deliver a number of benefits including: 

 

    • Being eligible to receive the private health insurance rebate;
    • Avoiding the Medicare levy surcharge; and
    • Avoiding the lifetime health cover loading if private insurance is not taken out before turning 30.

 

This is a snapshot of the things taxpayers should be thinking about as they approach the end of the 2019 financial year. Remember, it’s important that you discuss these considerations with your accountant.


Superannuation

We would like to highlight some superannuation related issues worth considering as we approach the EOFY.

We are here to assist you and if you have questions, or you would like to explore opportunities in your own year-end superannuation planning, please don’t hesitate to contact Ulton Wealth Management.

Things to consider: 

  1. Concessional contributions include contributions made by an employer such as the 9.5% superannuation guarantee, salary sacrifice contributions and personal tax-deductible contributions. The maximum concessional contribution that may be made this financial year is $25,000. 
  2. If planning to make additional superannuation contributions, remember that 30 June falls on a Sunday this year. Consider making them well in advance of the end of the year to ensure they are received by your super fund on time. Contributions made by electronic funds transfer, e.g. BPAY, are not deemed to have been made until the money appears in your super fund's bank account. This could be some days after you initiate the transfer. Some funds have advised their cut off dates for BPAY are as early as 21st June this year.
  3. The rules around making personal tax-deductible contributions have been relaxed significantly. Most people, not just the self-employed, are able to claim a tax deduction for their personal contributions. But limits apply and steps need to be taken to ensure a tax deduction is valid.  Ask us how.
  4. Your total superannuation balance as at 30 June 2018. This is the total of all your superannuation accounts and may influence whether you can make non-concessional (after tax) contributions to super, your eligibility to access the ‘three-year bring forward’ opportunity, your eligibility to receive Government co-contributions and a tax offset for any spouse contributions you may make.
  5. Non-concessional contributions are contributions made from after-tax income and from other savings. The maximum amount that can be contributed this year is $100,000, or up to $300,000 using the three year bring forward rule. However, if your total superannuation balance at 30 June 2018 was more than $1.6m, you cannot make any non-concessional contributions. If it was between $1.4m and $1.6m, the maximum that can be contributed under the three-year rule has been scaled back. If you contributed more than $180,000 in 2016-17, the amount you may be able to contribute this year has been reduced.
  6. If your total income is less than $52,698 you derive at least 10% of your income from employment or self-employment, and you make a personal non-concessional contribution to super, you may be eligible to receive a Government co-contribution of up to $500.
  7. People who make a contribution to super for their spouse may be eligible to receive a spouse contribution tax offset of up to $540. A spouse contribution tax offset is available where an eligible spouse for whom a contribution is made has income of less than $40,000.
  8. With the introduction of limits on how much you can have in a superannuation pension account, the ability to split contributions between spouses, and therefore move towards equalising super, is more important than ever. There is still time to split up to 85% of concessional contributions made in the 2017-18 financial year. Concessional contributions made in 2018-19 may be transferred to a spouse's account after 30 June 2019.  Ask us how.
  9. On 1 July 2017 we saw the introduction of the ‘transfer balance cap'. In simple terms, this restricts the maximum amount that may be transferred to a super pension or income stream (these terms are interchangeable). The transfer balance cap is currently $1.6m.
  10. There are occasions when concessional or non-concessional contributions to super exceed the permissible limits. If this happens, the Australian Taxation Office will issue an excess contribution determination. If you receive a determination it is essential you contact us immediately. There are strict timeframes that must be adhered to in order to minimise penalties.
  11. The Australian Taxation Office is holding more than $17.5bn of lost and unclaimed superannuation on behalf of Australians. We can assist you in searching for any lost superannuation to which you may be entitled.
  12. One of the attractions of superannuation is the ability to draw a very tax effective income once you retire. However, to receive favourable tax treatment, a minimum amount of income must be drawn each year. Check to ensure you have drawn the prescribed minimum level of income before the end of the financial year.
  13. Superannuation pensions are not solely reserved for those who have retired, but people who are approaching retirement age may also draw a pension from their super under ‘transition to retirement’ rules. It is important that once a person receiving a transition to retirement pension meets a superannuation ‘condition of release’, such as retiring, even if before the age of 65, they inform their super fund or adviser immediately. Doing so may reinstate some of the taxation advantages that were lost from 1 July 2017.
  14. The money a person has in superannuation does not automatically form part of their estate when they pass away. There are a number of options available for a person to nominate a beneficiary to receive their super in the event of death, however, the rules are complex. We encourage all clients to make appropriate death benefit nominations. If a nomination was made in the past, it is important to review it from time-to-time to ensure it remain current and up-to-date.

 


Insurance

A significant number of Australians remain either uninsured, or under insured. This can have dire consequences for families in the unfortunate event of a family member dying, having a serious injury or illness, or some other unforeseen event occurring.

While it is common to do end-of-year pre-tax planning or review of superannuation and other financial affairs, the end of the financial year is also a good time to have your insurances reviewed.

Reviewing insurance is not an easy task, but we are here to assist you. If you have questions about any of the issues mentioned in this email, please contact us.

Things to consider: 

  1. Type and scope of current policies – is the insurance you hold still suitable to your circumstances? As life changes and our family expands, we take on more debt, buy a new home - or reduce debt by paying off loans - our needs for insurance change. The types of policies we have, the current levels of insurance, the premiums we are paying, and policy terms and conditions, should all be reviewed from time-to-time. Now is a good time to have a personal insurance ‘audit’ carried out to ensure that the cover you have is appropriate for your family’s circumstances.
  2. Insurance ownership – many people have their insurances attached to their superannuation. This may be appropriate, however, there are times when holding insurance through super may not be the best option. For example, if you were to pass away and your insurance was paid to your adult children, imagine them having to pay 30% tax on the insurance benefit they receive! With proper structuring, this can be avoided.
  3. By reviewing the way in which your policies are structured, we can ensure that in the event of a claim arising, the tax consequences are minimised.
  4. "Protecting Your Super Package” – legislation passed in February 2019 may result in people with inactive superannuation accounts finding that their insurance cover held inside their super fund is cancelled. This will apply from 1 July 2019. If your super fund determines your account is inactive, they will write to you and inform you of the pending cancellation of your insurance. If you receive such a letter from your super fund, it is important that you contact us without delay. Your insurance may be retained by either making a contribution to your super fund, or by making an election to retain your insurance
  5. Nominated beneficiaries – many insurance policies (other than those held through super) enable you to directly nominate a beneficiary to receive the benefits in the event of a claim arising. Nominating appropriate beneficiaries can be extremely useful as the insurance proceeds are paid directly to that person and do not form a part of your estate, to be dealt with under your will. However, death benefit nominations need to be reviewed from time-to-time to ensure they remain appropriate. If you don’t have a death benefit nomination in place, it is something worth considering.

 

Ensuring that you have a properly structured, affordable, and adequate insurance portfolio in place will ensure that in the event of death, disablement, temporary incapacity, or being diagnosed with a critical illness, your family is being provided for financially.

We're here to help.

Should you have questions about any of the issues raised, or if you would like us to review any aspect of your business or personal tax planning, superannuation, insurances, or would simply like to check that everything is on track, please don’t hesitate to contact your trusted and dedicated Ulton Advisor to arrange an appointment.

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